Thursday, April 2, 2020

Financial Management - Emergency Funds



An Emergency Fund is super important.  There are many theories on how much one should stick away, but it is really up to the individual as far as what one is truly comfortable with.  I take my monthly expenses into account so I know the bare minimum amount I need each month and then multiply that by six months to determine what I consider to be enough.  Since I don't want to have to save up a ton of money into this fund I want to keep my monthly expenses as low as possible.


I only touch this fund if there is no other possible way to pay an expense.  If I've exhausted all other avenues and there is simply no other way to meet my obligation then I will use this fund.  Once I've done that I will do everything I can to put those funds back in place quickly so I have them restored and ready in case of another emergency.


If you do not have an emergency fund I encourage you to decided on an amount and fully fund one as soon as possible.  Even if you can put away three or six months worth of funds establish something.  Something is always better than nothing.  And then once you have that in place bump it up 25% to 50% and fund that amount as well.  You will breathe much easier knowing that you have that money in place.  Just in case.  Because, speaking from experience and we are all experiencing it at the moment, you just never know what might happen.


2 comments:

  1. I am from the Suze Orman school of financial management - and have a nice size emergency fund. I started it in November 2015 after I paid off my house. Some months I couldn't put much in it ; but I put what I could and I never touched it. So now I am using some of it. The only problem is I hate dipping into it.�� I just have to tell myself it is a blessing to have it.

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    Replies
    1. Exactly right Connie. That is what it is for. Take care and stay safe! :o)

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